Birth of a bubble: Web 1.0

It was the best of times in Northern Colorado. Unemployment was virtually nonexistent, the country had emerged largely unscathed by the Asian financial crisis, stock portfolios were skyrocketing and the party of a lifetime – promised for almost two decades by the artist then-as-now known as Prince – was almost here.

By all accounts, business was good in 1999. A general sense of invincibility built over the year, particularly in the technology sector. Offshoring was not yet a part of the tech industry lingo, and while the dreaded Y2K computer glitch caused a yearlong frenzy of seemingly superfluous preparation, it also reinforced that our world had become a digital one.

In 1999 and much of 2000, the standard Business Report photo illustration featured “business owner sitting in front of computer.” Anyone with a desktop PC and halfway-decent Internet connection was suddenly an entrepreneur. Dot-coms dotted the Northern Colorado business landscape, springing from just about every industry. From ag to hospitability, real estate to collectables, if there was a service to sell, it was going online. All a company needed was an “e-” prefix or .com suffix and suddenly there were investors ready to pump in capital.

Capital explosion

Venture capital investment in technology startups exploded in late 1999. According to the MoneyTree Report, compiled by PricewaterhouseCoopers and the National Venture Capital Association, venture capital funding reached $22.3 billion nationally and $892 million in Colorado for the fourth quarter of 1999 alone. By comparison, venture funding for all of 2009 was $17.68 billion nationally and $529 million in the state.

Techs also led the stock market in 1999. An analysis published in the Business Report at the time showed that Longmont’s Applied Films Corp., which saw a 430-percent increase in its market stock price from the end of 1998 to the end of 1999, topped the list of local stock performance. Avert Inc. in Fort Collins came in second, with a 170-percent increase in stock price, and Advanced Energy Industries Inc. saw the third-highest increase, with stock prices climbing 97 percent.

With existing techs doing well and capital flowing, it followed that more and more firms sought funding or exit through initial public offerings. In 1999, 477 firms launched an IPO; 10 years later only 50 new IPOs came to market.

It wasn’t all boom in 1999, though. Some cracks had already appeared for local firms that caught the “Asian Flu” – a Pacific Rim financial slump that was in many ways a harbinger of the impacts of globalization.

Advanced Energy announced in September 1998 that it would lay off 128 workers at its Fort Collins headquarters. Weeks later, Hewlett-Packard Co. announced it would eliminate jobs at its Loveland site and shelve construction of a semiconductor plant in Fort Collins. Electronic Fab Technology Corp., a contract manufacturer for high-tech companies, cut half of its 240-person work force in Greeley.

Bubble burst

But it wasn’t until the dot-com bust in early 2000 that Northern Colorado, along with the rest of the world, felt the true effects of the bubble. The tech-heavy Nasdaq composite tracks its value “milestones,” recording only four from 1971 through 1990. During the boom, the exchange reached milestones on a weekly basis. The last milestone recorded was 5,000 on March 9, 2000, when the Nasdaq topped out at 5,048, double its value from a year before. There have been no milestones posted since, and today, the composite is trading under 2,500.

After businesses paid for all the Y2K-compliant machines and software, demand dried up. Dot-com firms started dropping like flies with little or no assets to show for the millions – some on paper only in the form of vastly inflated stocks – that had been invested. Hardware developers and manufacturers that supplied the Web 1.0 firms with their servers, computers and networks saw their buying power vanish seemingly overnight.

In 2001, high-tech layoffs in Northern Colorado topped 1,500, and thousands more would follow in the coming years. The industry saw manufacturing going overseas, innovation acquired rather than developed in-house, and things as simple as reporting local employment numbers thrown to the wayside. HP’s last divulged local employment level was 4,600 – in 2002. Now, with employment at a fraction of that, it is company policy to remain mum.

The bust brought an end to many things, but with the new millennium peaking around the corner and the vast new environment of the World Wide Web at our fingertips, we were ready to party like it was 1999 – because it was.

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